Private pension levy may be kept

A levy on private pensions which costs savers an average of €2,500 a year may be retained in next week’s budget, despite previous commitments to abolish it.

Finance Minister Michael Noonan is keeping his options open in relation to the tax, which will be part of the budget options being considered.

But Fianna Fáil is warning that the levy must not be used to fund reductions to income taxes which have been promised over the next three years.

The 0.6% levy — introduced in 2011 to fund the Government’s jobs initiative — was a temporary measure which was due to expire at the end of last year, but was extended by a year in the last budget. A further tax of 0.15% — to fund an “insurance” for any state liability for a pension fund collapse — was introduced as a temporary measure for 2014 and 2015.

A spokesperson for Mr Noonan said a decision on the levies would form part of the considerations ahead of the budget.

The minister told the Dáil last week that a reduced Vat rate of 9% for the hospitality sector and a cut to the air travel tax — both of which were funded from the pension levy — had had a positive impact on the economy. The Government will have taken some €2.3bn from private pensions under the controversial levy between 2011 and 2015.

This, coupled with a lack of public backlash — has led to speculation it may be continued.

Samantha McConnell, chief investment officer at IFG Corporate Pensions, said: “If you think about the uproar there is about the water charges, what is astounding to me is that this has gone through and we are not having marches.”